Deacon Company is a merchandising company that is preparing a budget for the three month period ended June 30th The following information is available Deacon Company Balance Sheet March 31 Assets Cash$55,000Accounts receivable36,000Inventory40,000Buildings and equipment, net of depreciation100,000Total assets$231,000 Liabilities and Stockholders' Equity Accounts payable$51,300Common stock70,000Retained earnings109,700Total liabilities and stockholders' equity$231,000 Budgeted Income StatementsAprilMayJuneSales$100,000$110,000$130,000Cost of goods sold60,00066,00078,000Gross margin40,00044,00052,000Selling and administrative expenses15,00016,50019,500Net operating income$25,000$27,500$32,500 Budgeting Assumptions 60 of sales are cash sales and 40 of sales are credit sales Twenty percent of all credit sales are collected in the month of sale and the remaining 80 are collected in the month subsequent to the sale Budgeted sales for July are $140,000 10 of merchandise inventory purchases are paid in cash at the time of the purchase The remaining 90 of purchases are credit purchases All purchases on credit are paid in the month subsequent to the purchase The accounts payable at March 31 will be paid in April Each month's ending merchandise inventory should equal $10,000 plus 50 of the next month's cost of goods sold Depreciation expense is $1,000 per month All other selling and administrative expenses are paid in full in the month the expense is incurred Required 1 Calculate the expected cash collections for April, May, and June 2 Calculate the budgeted merchandise purchases for April, May, and June 3 Calculate the expected cash disbursements for merchandise purchases for April, May, and June 4 Prepare budgeted balance sheet at June 30th (Hint You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available

Deacon Company

Balance Sheet

March 31AssetsCash$55,000Accounts receivable36,000Inventory40,000Buildings and equipment, net of depreciation100,000Total assets$231,000Liabilities and Stockholders' EquityAccounts payable$51,300Common stock70,000Retained earnings109,700Total liabilities and stockholders' equity$231,000

Budgeted Income StatementsAprilMayJuneSales$100,000$110,000$130,000Cost of goods sold60,00066,00078,000Gross margin40,00044,00052,000Selling and administrative expenses15,00016,50019,500Net operating income$25,000$27,500$32,500

Budgeting Assumptions:

60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
Budgeted sales for July are $140,000.
10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April.
Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold.
Depreciation expense is $1,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare budgeted balance sheet at June 30th. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet.)